Wall Street investment bank Goldman Sachs (GS) sees more gains ahead for small-cap stocks.
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Goldman Sachs forecasts that the Russell 2000 is likely to see strong gains in the first half of 2026, even if the index of small-cap stocks doesn’t outperform the benchmark S&P 500 throughout all of next year. So far in 2025, the Russell 2000 has risen 14%, lagging the S&P 500 index by three percentage points.
However, 2025 has proven to be the Russell 2000’s best performance in about a decade, and small-cap stocks have outperformed the equal-weight S&P 500 index this year. Small-cap stocks are generally defined as securities that have a market capitalization of $10 billion or less.
Outperforming in Uncertain Times
In its 2026 outlook, Goldman Sachs writes, “Our baseline macro outlook is supportive for small-cap upside in early 2026.” The bank says small-cap stocks should benefit from continued U.S. economic growth, moderating inflation, and further interest rate reductions.
Goldman Sachs also notes that investors could turn to small-cap stocks amid ongoing economic and geopolitical uncertainty, and as investors move away from richly valued technology stocks and securities associated with the artificial-intelligence (AI) trade.
The team of analysts concludes, “Our economists’ 2026 real U.S. GDP growth forecast of 2.6% would be consistent with a 12-month return of roughly 10% for the small-cap index.”
Is GS Stock a Buy?
Goldman Sachs’ stock has a consensus Moderate Buy rating among 14 Wall Street analysts. That rating is based on six Buy and eight Hold recommendations issued in the last three months. The average GS price target of $841 implies 6.07% downside from current levels.
